DiPP - Online platforms: rather a boon than a bane for Europe

Online platforms are the gateway to whatever is possible online. They are so ubiquitous; their magic operates so smoothly that they have turned into the very symbol of digital disruption. Everybody sees them as the ultimate facilitator, the unparalleled vehicle to do business globally, to experience or produce content without frontiers.

The Communication of the Commission dated 25 May 2016 praises the prominent role of platforms in creating the ‘digital value’ that underpins future economic growth. It identifies innovation opportunities and regulatory challenges. Online platforms are portrayed as facilitating efficiency gains and acting as a magnet for data-driven innovation. They will work as a catalyst to the EU’s existing strengths, such as manufacturing, as exemplified in Commissioner Oettinger’s next battle, ‘the one Europe cannot afford to lose’.

At the same time, the Commission wants to make sure that these key principles are enforced:

– Level playing field
– Responsible behaviour of online platforms
– Transparency and fairness for maintaining user trust and safeguarding innovation
– Open and non-discriminatory markets in a data-driven economy.

Together with the European agenda for the collaborative economy and with the forthcoming European Data Initiative to be released by year-end, this framework is intended to help the EU reap the benefits of the ICT-enabled economy.

The growing economic and social impact of platforms warrants the thorough attention given to them by the Commission via public consultations, working groups, etc. in order to provide evidence-based assessment of problems possibly not addressed by current laws and regulations. In light of this comprehensive documentation, B2B appears to be the only area in possible need for improvement, perhaps by complementing competition law. Competition law is often charged with moving too slowly but documenting complex cases thoroughly and independently before making a sensible decision that will stand the test of time cannot happen overnight. More generally, the Commission sticks to its two ‘mantras’: a strong belief in the merits of self- or co-regulation; a determination to lift legacy regulatory burdens that are no longer warranted.

The Commission is keen to set up the environment that will help platforms to flourish. In the overall context of the DSM strategy, a great deal of works is still in progress while some areas have already been declared off-limits to revisiting, like the e-Commerce Directive for instance. This flurry of consultations, Communications and other steps stretches the inter-services coordinating skills of the Commission, but the present Commission definitely rose to this challenge: probably as a reflection of its new structures, it has been operating in a more ‘joined up’ fashion than ever in the past.

The internal consistency challenge the Commission is facing as digital technology permeates more or less all its activities is a steep one indeed. But it is nothing to compare with the next in line, i.e. accommodating the whole gamut of Member States’ views if fragmentation is to be avoided. In this respect, several of those are poised to go it alone. This is a matter of grave concern. In the course of the debate, it appeared that France in particular has developed its own definition of platforms, complete with a duty of loyalty, transparency and an obligation to keep personal data in France (see Hogan Lovells’ article). This is how far an emotional reading of a perceived threat on ‘digital sovereignty’ – whatever that means: a control on digital technology emulating the power of the purse in tax sovereignty or border control in territorial sovereignty? – may take a government. Nobody knows if all the provisions voted by the Senate will survive the reconciliation process, but this direction of travel is worrisome as regulatory fragmentation is a sure prescription to forego the scaling-up benefits of a technology that knows no border.

Evidence-based studies (see Hogan Lovells’ White Paper and TNO-Ecorys-IVIR study) have been made public to show the conspicuous absence of a clear definition of platforms or of any regulatory gap to be filled for lack of applicability of current laws and regulations. Since addressing platforms as a single category downright defies logic, it seems more productive to explore their underlying characteristics (see platform characteristics by TNO). Most of them, such as revenue model, direct and indirect network effect, use of data, dependence on other companies on a platform, etc. are well known from other industries and cases. This is not to say that ‘nothing is new under the sun’, as certain characteristics such as network effects and use of data do play out faster and more pronouncedly in digital platforms, but existing rules apply more often than not, ‘as is’ or with minor adjustments. This is true for well-known large platforms and also for smaller ones, such as the thuisafgehaald.nl platform. This platform links home cooks to people in their neighborhood that are interested in ordering a home-cooked meal. Applying the full range of food safety regulations here would effectively put an end to the service. In this case, a re-interpretation of the regulations that takes into account the typically smaller user groups of home cooks compared to restaurants would be called for, as the risks and potential harm are smaller.

Another building block worth keeping in perspective is the ‘Better Regulation’ focus of the present Commission. A cardinal principle that underpins their approach is a clear identification of a problem as a prerequisite to possible action. Inspiringly perhaps, professor Howard Shelanski has found that, due to regulators’ systematic bias toward seeing anticompetitive conduct in new business models, ‘Type I’ error – when a regulator mistakenly imposes a remedy – is more costly than ‘Type II’ error – when a regulator mistakenly fails to impose a remedy.

Platforms can indeed help startups scale up faster. However, the concept of a 29^th regime to get around the thicket of a variety of 28 legislations has failed the test in other fields and does not seem to have much traction.

Platforms happen also to help regulators themselves run a more effective oversight of the operations under their watch.

In conclusion, platforms look definitely more as a boon than a bane for Europe. However, further documenting of the fast developments they induce is of the essence if Member States are to make the most of this windfall in the spirit of the related Communication from the Commission.